Bitcoin Crumbles To 3-Month Lows On Mt.Gox As CEO Defends Exchange

The ongoing exodus from Mt.Gox - a major Bitcoin exchange - amid withdrawal halts, has seen a massive $150 spread open up between it and other exchanges. Having tumbled by over 50% in the last 2 weeks, Mt. Gox pricing is back at levels first seen 3 months ago. This chaos (and the ongoing 'finger-pointing' over who is to blame) had led Mt.Gox CEO Mark Karpeles to come out swinging in the following interview...

FORBES: Was Mt Gox’s coding to blame, and are other exchanges having the same problem?

Mark Karpeles: First, you need to understand that the Bitcoin implementation we use in MtGox was created back in 2011. The bitcoin client is not meant to handle the kind of load MtGox has and was having more and more troubles, lagging and crashing. We created our own implementation to solve those issues and to offer a better flexibility to our customers.

Over time Bitcoin changed and started implementing changes that would require people using previous versions of the software to upgrade. While we followed most of those update[s] we were more and more busy and couldn’t keep up with all the changes.

With bitcoin 0.8.0 (released 19 feb 2013) a breaking change has been included that would prevent transactions to be accepted if their signature did not include the right number of zeroes in front of the signature values (in an effort to reduce risks of transaction malleability). We did not notice this change but a few of the transactions we were sending would become invalid because of this.

Due to this fact we started being more transparent on the transactions we sent, and provide a publicly available list of pending transactions. Nobody was however able to tell us what went wrong at that time. Since only a few transactions were affected anyway we didn’t give it much attention (recently we were able to look more into this and fix this issue).

This meant however that some of our invalid transactions were listed publicly, making it rather easy for someone with bad intention to alter these, hence the reason why many people claim there was an issue in our code. Now, transaction malleability does not affect only us, and while it might be more difficult to affect exchanges using regular bitcoin[s], it remains rather trivial.

Is there anything the Bitcoin Foundation can do to help solve this problem?

The Bitcoin Foundation has hired Bitcoin Developers for the purpose of promoting Bitcoin use. I guess the most puzzling part is why this issue hasn’t be[en] solved since 2011.

What constructive steps are both the Bitcoin Foundation and Mt Gox taking together to resolve the issues, and to have everything working at its best for the future?

We have proposed a solution that would allow people sending bitcoins to track sent coins no matter what happens in terms of malleability (a solution that can be applied quickly and without breaking anything), and the Bitcoin developers are preparing ways to prevent modified transactions from being relayed by the network (which will take a lot of time and may break some bitcoin custom clients).

There is obviously no perfect solution in this world, however this is how things are as of today.

Note that our announce[ment], while unfortunately upsetting a lot of people, allowed other exchanges to be much more cautious when faced with failing transactions, and most likely helped a lot of people understanding and dealing with the problem.

Sort of like when the COMEX collapses, retards will run around screaming "OMG GOLD PRICE IS COLLAPSING", when the truth is that people have just lost faith in the exchange, and have fled with their bitcoins/gold/silver/dollars.

Saying that "Bitcoin" has collapsed because of the ticker of a disgraced exchange is disingenuous at best and out and out fraud at worst. Tyler should know better.

The bitcoin community is letting MtGox collapse, like free market people should. MtGox has halted bitcoin withdrawals but has not halted cash withdrawals. That is why the price is dropping on their exchange and causing the overall price to drop too. Everyone is trying to convert their stuck bitcoin into dollars for whatever they can get. MtGox is fighting back by doing as many MSM interviews as possible. This isn't their first incompetent screw up or withdrawal freeze that's why bitcoiners are letting them fail.

Fonestar, isnt that guy in your avatar a famous poet convicted of being a fascist with ties to Musolini and Hitler. Didn't he go crazy? I thought you promoted BTC because it could not be conrolld by a government, a corporation, or a bank. Isnt that the opposite of your fascism?

The conspriacy theory is that BTC is the FED's USD part II. When USD fails the FED already has a backup currency that it can manipulate (and record all transactions). The CT would make Musolini proud. Thats the only tie in I see between Ezra Pound and BTC.

I hope fonestar follows up with his intrest in Pound. Last time I checked his BTC wallet it had less than 2 coins in it. Sometimes I think he makes stuff up.

Yes, pound placed his bets along with the fascists that they would end usury. He was called crazy in part because he did not like the fact he saw the world being taken over by a global network of usurious bankers and their schemes.

Similarly, stackers and Bitcoiners are identified as "crazy" by the sheep nearly eighty years later for trying to protect themselves from those same bankers.

Denninger had an interesting point this morning about bitcoin that maybe the bitcoin advocates can answer - why is there a significant price difference on the various exchanges and why doesn't big money swoop in to arbitrage those differences to make a shitload of money? You go into any coin shop, online or internet, and there is basically one gold/silver price.

Denninger thinks a 1% spread is "significant," but historically this spread has been much higher. When you factor in all of the deposit, withdrawal, trading, wire, and currency exchange fees, any potential arbitrage profit evaporates. Personally I think Coinbase has been running a bulk arbitrage (with customer funds) and that is what's caused prices to converge over the last few months... but that's just idle speculation on my part.

Take this with a grain of salt because I haven't been right about much in my life.....but I think once the MtGox nonsense sorts it self out the BTC price climbs back up.

There are is also a theory out there that the DDoS attacks on the big exchanges that have been happening are hard core BTCer's forcing the mallubility flaw into the open so the community will deal with the problem. So far the "bitcoin programers" have dismissed the problem as minor and insignificant. However the problem isn't small if you want to run a big automated efficient exchange.

Actually it was funny, fonestar tried to fund his wallet with 0.170 BTC at localbitcoins.com but by the time it reached three validations he no longer had enough to fund the escrow for the seller (less than $100).

Depends how big they let the spread go. Eventually it's tempting enough for serious money to be poured in. Gox is still the biggest player in your sandbox. Will they go away completely? Dissolved and all wallets shut for good? Is that possible with the finite commodity or currency that is BTC? Seriously interested to see where this goes. If Gox fails, the entire crypto currency story is losing years and years of credibility. Think Gox as the Lehman moment for your world but 10x worse.

Reminds me of these newsletters I used to get from some outfit calling itself the National Inflation Association founded by Jonathan Lebed. They'd send out their newsletters once a day, sometimes three times a day pumping up a stock. Page after page with all kinds of technical analysis. Broadvision and Synacor were two that come to mind. For months they'd pump a stock and it would rise, sometimes a little, sometimes a lot. But the end result was always the same - the stock would come back to earth to precisely the point where it was prior to the "pump-and-dump". Bitcoin will end the same way, not with a bang but a whimper.

Like with everything else in the financial world, you want an orderly exit or orderly default. Maybe Gox account holders get 1/10th of their balance. It would require the BTC board to get all exchanges to pile in. I'm looking at this through the lens of the fiat world. It's a test to your industry. If Gox has issues, no matter how long and how well they were known, then the other can have issues too. Confidence is what supports your currency as much as the others.

As long as the biggest exchange carrying BTC is the initialization of "Magic The Gathering Online Xchange" I think that there's an inherent credibility problem there. They made a smart move to rebrand from trading cards to cryptocurrency but once you are working on trading money, it's unacceptable to have this level of poor execution. Mt. Gox should have been paying for a standards guy to constantly monitor the BTC standard and ensure that MT. Gox's implementation was already 100% compliant before it was rolled out to the public. Mt. Gox didn't do the bare minimum that their position of trust required, they become unviable as a going concern.

Could be, but I don't think the risk is worht the trade. There is no guarentee that you will actually receive coin when purchased on MFGox. Furthermore, if you do not already have a cash account set up with them it will take weeks to fund it.

Given the trans mal issues, the volume could be skewed to the upside. Furthermore, Gox has traditionally been the largest exchange and without the ability to transfer either coin or cash out, people may simply continue trading on Gox as a cheap call. Essentially, if you still have cash or coin on Gox, you have to look at it as a sunk cost - at that point, why not trade? Gox has bounced back before (I don't think it will this time), so I think they are trying to pad their balances before hoping to receive a payout.

What are you trading BTC on Gox for? Are the account holders just wasting time trading BTC for USD, EUR or CNY in the hopes to cash out one day? Sorry, this makes no sense. Biggest exchange by volume and all the pips can do is trade / transfer within their own account, maybe with other Gox holders? Does this make sense to you? Are Gox players stupid or bored or both? Few maybe but we're talking biggest exchange here. So ... something doesn't add up for me anyway.

How did people use Gox for a year without conducting any transactions? You mean, they weren't even able to use their Gox account to buy the tuition in Cyprus or the Maserati in Long Beach, CA? I'm not being sarcastic, just trying to understand the reason why Gox which comes up as the biggest exchange was able to lure investors for a year to place Dollars into BTC wallets without allowing any outflows. I think the problems are more recent.

In the past, BTC withdrawals from Gox were working fine with the occasional hiccup.

USD withdrawals were kneecaped by the Feds about a year ago. Euro withdrawals were slow and Yen withdrawals were working fairly well. Since the beginning of 2014, even Yen withdrawals have basically stopped. And now BTC withdrawals as well. Pretty fucked up situation.

No more than now is the time to buy gold and silver through MF Global.

Any dollars or bitcoins that are sent to Mt. Gox will be lost for months or years in the upcoming bankruptcy proceedings.

This is what the COMEX will look like when it collapses. Paper gold and paper silver will go to zero, while the real thing takes off, freed from the shackles of the exchange. The same will happen with Bitcoin.

I have a serious question for the ZH brain trust. What , if anything , makes bitcoin , ultracoin or any other coin unique. It seems to me it is a bet on a horse race. They are all running the same race but at the end they are all horses. The FIATs are unique because of the societys ( military ) that backs them. PMs should require no explanation , they are elements and are UNIQUE , no room for argument. Gold is just Gold , FRN's backed by the most dangerous and destructive military aparatus in the history of the World. I can see why people bet on those the way the do. What I still have not been able to reckon is WHAT makes bitcoin different from any other digital coin. Anybody want to help this old fool learn something he can not figure out for himself ?

I think you answered all your own question(s) with the "in-betweens" regarding the "military" and "FRN"s

My advice? Don't gargle with Satoshi Nakamoto's cum like Fonestar has been doing for the past several months.

He's the poster child now for what not to do in the Bitcoin realm.

I'd say off-hand by the "up ^"'s he's been receiving today he's been humbled and humiliated!

P.S.

The only way we're ever going to get any of it back and it's my firm belief that we've missed that train too many times in the past 13 years to count, let alone the last 50, is obeying the laws that we already have on the books. More precious than any currency, stock bitcoin or PM could ever hope to be.

There should have been a civil war in this Country 10 years ago with Bush and Cheney swinging from rope long before the "Manchurian Candidate" from Chicago made his presence known!

Btc has no contracts, no letters of intent, no letters of credit, no assets, no real tangible property. what it instead has is....

the network - which consists of OTHER PEOPLE's property, and those other people can drop the network like a hot potato and take THEIR assets elsewhere. In fact, many miners have their programs set to mine whichever cryptocurrency gives them the best return for the kW's their computers' consume They switch at a moment's notice by design. The more miners that do this the more you'll see stability in relative value to some extent. It's the miner's version of HFT in some ways, and that's gonna cause problems (if it already hasn't).

merchants have ZERO invested in this. No hardware, no scanners or swipers, no initial investment that can't be switched over to accepting wtfcoin in a heartbeat. No one in any part of the transaction chain is really married to Btc: not the merchant, the exchange,or the escrow issuers (when there is one). If this all pans out they'll most likely accept any number of crypto currencies not much differently than they currently accept VISA, Discover, Cash, etc. One salient difference is that VISA and other plastics come with strings attached, and currently cost more to conduct the transaction from the electronic aspect, but there are total costs to be considered, and they need to add counterparties to the transaction to insure against failure to perform. Those counterparties aren't going to do that out of the kindness of their hearts. What this would likely do is force plastic's business modle to change and to brings their costs in line to compete.

Thanks to the ZH brain trust. These are the conclusions that I have come to as well. In this age of high bandwidth bullshit in high def , I find the need to check myself regularly to see that I am not totally full of my own brand of BS. I do believe in the power of peer to peer commerce. Bitcoin seems to me to be another conduit for transactions the same as so many others. The system just seems so fragile that in the age of continuity of Government plans complete with internet kill switches I do not want my hedge locked up in any virtual exchange when I NEED it. Call me old fashioned but I will stick to the shiny stack that can be drawn upon 24/7/365 and defended vigorously by ME and some Pb/Cu barbaric technology. But I am just another natural born fool. I do greatly appreciate the diversity of opinion and intellect found on these threads. May we find the best in one another and choose well for our families sake.

In it's current state the "engine" of our world commerce which rests against billions of keyboards and computer application(s) we don't know about, their unfortunately at the present time are "no rules that govern it" and haven't governed it since it came into existence more than 20 years ago. For lack of a better analogy it really is the open frontier and the Wild West and it's unfortunate to repeat this but it's very deliberate.

Until we have lawyers and judges that will prosecute financial crimes to the fullest extent possible which we know are the worst they have ever been in large part because of the technology that allows it to be exploited we will keep seeing it and it will only get worse.

As I've said many times before Bitcoin is a marvelous medium of exchange principle that has real worth and potential in the future, but until you have an investment in protecting the investors using it along with guarantee(s) by the service providers to build real authentication into those networks (on the outsie), in addition to what BTC already offers (on the inside) it's doomed.

Many will say encryption in BTC is already enough to make it work. I say BS.

There are some important differences between bitcoin and certain "altcoins." Bitcoin is deflationary, so me altcoins are designed to be inflationary (see: Dogecoin). Some are centralized scams waiting to be (or already are) corrupted by TPTB (see: Ripple). Others are built to be simpler than bitcoin and allow for "smart contracts" like derivatives and conditional contracts (see: Ethereum). Yet others still are clear pump and dump schemes (see: Maxcoin).

Many in the community foresee a future with potentially dozens of different digital currencies, perhaps with different characteristics, trading simultaneously and priced off of a bitcoin underlying.

While the technology behind bitcoin will not be leaving us any time soon, bitcoin might not end upon being the final currency. Another currency very well may come around with some aspect that is so superior to bitcoin that everyone switches to it, but it seems unlikely. Not only is the network effect enormous, but bitcoin is flexible. Remember this is only bitcoin version 0.0.8

the Middelton Gambit!!!...i like him and awarded many quatloos to his team..lol and mercuryquicksilver was guessing avatars on fonestar(hi fonestar!) oh this ultracoin rumble is gaining steam!...oh...verbucks...its whats for money...
but good way to get us rocking on virtu-monies...et al...lmao tylers..thankyou

Yes, Overstock does still accept BTC. As I predicted, I think we will be seeing $500 in BTC in short order. Karpeles decided to try to cover his own rear-end by blaming bitcoin and the Bitcoin Foundation (the board of which he sits (sat) on and of which MtGox was one of only 2 "gold members") for not ennacting reform on something that had been known since 2011. The issue is not that the Bitcoin Foundation should have done anything - given the open-source nature of bitcoin, they should not have done anything - but rather that exchange owners and operators should have taken common sense precautions to protect against these trans mal issues. Other major exchanges were prepared for this type of issue well ahead of time. It was only Karpeles who decided not to implement proper security measures. He belongs in jail.

Karpeles acts as if the Bitcoin Foundation is the company responsible to pay coders to fix stuff. That is nonsense.

Bitcoin is an open source project, the commonly accepted model is for companies to pay coders to work on project important to them (or for individuals to volenteer). If Karpeles wanted this fix, he should have had MtGox implement the fix and add it to the code base. The individuals working on Bitcoin for free felt other issues were higher priority and said so.

Developers actually offered to implement the changes when they realized the weakness in the code. Gratis. Karpeles (admittedly a Dungeons and Dragons nerd until creating Gox) succombed to the stereotypical nerd hubris and thought he was too smart and therefore declined.

There is also talk that there were some patches implemented that sat in an update he never uploaded. Real professional operation. Hell, they did not even check invoices versus confirmed transactions which is what created this problem in the first place. Imagine Target handing out refunds without checking the validity of recipts? Some people re-submitted claims 2 and 3 times and got refunds every time.

Once this exploit was discovered, the same attack took place across every exchange which is why they shut down withdrawals until they could figure out the problem.

Imagine 10,000 people lining up at the customer service counter at Target with shoeboxes of recipts. Sure, some of the customers may have legitimate issues, but it is safer and easier to just close up shop for a day and re-evaluate (see: Bitstamp, BTC-e)

I hope Karpeles realizes what he did. I would not be terribly surprised to she him turn up dead. Except in this case, the media would not report is as a suicide.

It's reasonable to assume that Mt.Gox will never pay out a penny of US$ or even a fraction of a Bitcoin. If you ever get anything out of it, consider it like a gift, or winning the lottery.

Various exchanges such as the elusive black-market "Silk Road version 2" are failing left and right also. It's basically a huge cave-in. Unless you have your Bitcoins in your own secure storage, you are at risk. And even then, the value of those Bitcoins in US$ may go down further. (I may be wrong on this, but it's my best estimate based on reading many commentaries on reddit etc.)

"Fonestar,i listend to you and nowi hae lot 30% of my value.....wtf man...what should i do?"

What you might do is consider yourself lucky you didn't pull the trigger when 1 Bt was going for $1256 USD.

He was pumping just as head then as he has been lately. His credibility (what little there was_ has been shot to Hell.

A read of his youtube profile and his occassional civil comments herein might lead you to believe that he is a forthright person who truly does believe in freedom from the BoE, the FED, etc.

The amount of utter and no-stop bullshit, however, might be expected to lead others in his circle to tell him repeatedly to stfu. They've failed miserably. Maybe they're adherents to the "any publicity is good publicity" axiom. That said, I wouldn't hire Jeffery Dahmer to babysit; notoriety nothwithstanding.

Mitch, first of all I commend you on such a bold choice of user name. It truely does warrant more than a paper bag as avatar.

I was thinking about the BTC high and AU low today...interesting....not sure it means fuck all...but it is interesting.

Naanaaanaaaanaaaanaaaaanaaaaaanaaa.

Ty: No, that guy was Mitch Cumstein, my roommate. He's a good guy. Don't be obsessed with your desires, Danny. The Zen philosopher Basho once wrote: 'A flute with no holes, is not a flute. And a donut with no hole, is a danish'. Funny guy.

If you want to go further, the high in stocks was on the last trading day of the year. The lows in bonds, silver, & gold were on the last trading day of the year. Might not mean anything. Maybe it has hints of 1989 Japan. Someone on this site...ah...Tyler....do the research and write an article about it.

Gox has been on the outs for a long time. Anyone who still trades with them ignores their past. Most people I know have moved on to the other exchanges that have decent volume. I'm not surprised Mark is trying to defend his position, but he essentially ignored a protocol change that has been discussed for over a year - and now tries to make it look like it isn't his fault.

It is his fault.

Either he can get someone in there that understands the technology and step down, or watch as his exchange gets pummeled to irrelevance by others who know what they're doing. Glad Tyler put in the other charts, at least someone is looking at the bigger picture here. And yes victoria, Bitcoin goes DOWN and UP.

agreed. people bitch about fiat and then go "all in" on crypto. WTF is the difference? at least with fiat you have something in your hand. cryto is even more smoke and mirrors and some teenage computer hack can rob you blind without peep.

Of course, but everyone knows how to lock a door, buy a gun, bar a window, buy an alarm, etc.

If the same cannot be said for cc, and if the average John/Juan/Yuan is being counted on continued growth of Btc (for example), then you'd best facilitate that for him and pronto. Luckily for cc, 95% of the world hasn't a clue (yet) what it is, and this blip on the radar won't need to fall into a memory hole.

Yes, I'm aware that douchestar wrote yesterday that he didn't give a fuck what the average Joe thinks. Taking my cue from him, when important customers visited today I told them to go fuck themselves! It's a brilliant business model; douchestar says so.

You've read my previous replies to you, and likely understand that I empathize with the ecosystem to a great extent, but my posts evince my skepticism, and at this point, however, I'm not donating a dime to the cause. My crowdfunding $$ go elsewhere.

MFGox has cause not 1, not 2, not 3, but FIVE crashes dues to poor management. This is just the latest incarnation of Goxing. BTC has recovered and rallied everytime before, and I predict it will happen again. Growing pains in a maturing market.

"Everytime" is a bold and presently false statement. The charts show a peak at ~ $1250 in Dec, then a drop to ~ $700, then a rally to ~ $1000, then another drop to ~ $580, then a rally back to $1000 end of Dec, and a steady decline ever since.

Its previous rallies required a few days. It's had 6 weeks to move off that steady decline and it has yet to do so. Sure, the last few days don't help, but the decline was still 6 weeks and continuing. I wouldn't count on repeat business from everyone who's bailed on you. Trying to entice them back with a slogan of, "We're pretty sure it's fixed now, and that at least for a while it might work" is honest but likely won't work.

"It's always done this before" is a common preface to pumper's statements, but in point of fact it's far more truthful to say, "It's never done this before." The next poster that writes that they've "seen this pattern before" needs to have their head examined if they truly believe that. Pattern????